Roundtable of Experts Discusses 50-year Rise of Intangible Assets as Dominant Source of Corporate Investment and Equity Market Value Creation

PONTE VEDRA BEACH, Fla., March 30, 2023 /PRNewswire/ -- The Journal of Applied Corporate Finance recently published its Capital Deployment Roundtable: Measuring and Managing Intangible Investment, a conversation exploring the remarkable decades-long shift in corporate investment from tangible assets like machines and factories to intangible assets like brands, human capital and innovative technologies.

Selected highlights include:

Anup Srivastava of the University of Calgary's Haskayne School of Business articulated the issue this way: "This shift has created an enormous challenge for accounting and financial reporting. US GAAP and the whole related structure of financial reports was created and designed for companies that use physical assets to produce physical products. But as companies rely increasingly on intangible assets like the knowledge embodied in pharma R&D pipelines, or corporate brands and employee talent, our financial reporting has become increasingly less effective in capturing the value created by companies."

Gary Bischoping, Partner at private equity leader Hellman & Freidman and former CFO of Varian Medical and Finastra, reflected: "A company's capacity to create value, which used to be provided mainly by hard assets, now resides mainly in the knowledge, energy, and initiative of its best and brightest and most driven people."

Glenn Welling, Chief Investment Officer of Engaged Capital noted: "One immutable tenet of successful fundamental investing is the importance of understanding how products and services provide a true source of sustainable differentiation and how that translates to economic outcomes. That principle has been with us at least since Graham and Dodd in the 1930s, but what has changed are the drivers of corporate profitability and investment returns, whether they be the network effects or eyeballs or labor costs or marketing effectiveness."

Paul Clancy, Executive Fellow at Harvard Business School and former CFO of Biogen and Alexion commented: "New companies are generating enormous amounts of cash flow with very little ongoing capital investment …. And in this sense, our conventional Michael Porter-inspired thinking about what protects our cash flow over sustainable periods of time has changed."

Greg Milano and Riley Whately of Fortuna Advisors (fortuna-advisors.com), a strategic advisory firm that helps clients develop new insights and transform decision-making to deliver shareholder value, led the roundtable with additional participation from Shiva Rajgopal of Columbia Business School; and Ken Wiles of the University of Texas McCombs School of Business.

SOURCE Fortuna Advisors LLC